Cofathec Heatsave(building services and energy management)and T Dunwoody & Partners(building services consulting engineers)are bringing to the attention of the industry a potentially radical approach to improving customer satisfaction and performance to provide the commercial property market with a more efficient option to property management:Paying for Performance.The two companies have pooled their knowledge and resources of commercial premises and are presenting an approach to building management whereby the client pays only on performance - and the performance delivered is guaranteed.
As Richard Derry,Chief Executive Officer of Cofathec Heatsave, explained:“Building services management has evolved to become a sophisticated service which incorporates a lot more than simply maintaining the building’s plant.Energy procurement and management, lifecycle costing incorporating future funding for planned equipment replacement,and risk transfer from client to the building services supplier,all play an important role in ensuring the best possible conditions for the occupants.”
“But it doesn’t stop there,” added Mike Goodwin of Dunwoody.
“Once these are in place the client needs to establish an audit program to ensure that the guarantees are being achieved and create a benchmarking framework that engenders future continuity of the service supply and continuous improvement.”
Paying for performance
Who manages the risk has become an important element of modern maintenance schemes.Risk transference arrived in the 1990s via PFI schemes and has since impacted on public sector contracts;both PPP and LIFT contracts focus on establishing client/supplier partnerships and shared risks.This has led to greater emphasis on measuring performance within environmental conditions(temperature, humidity,etc);system efficiencies (boilers, chillers),energy consumptions,the standard of maintenance being delivered,lifecycle forecasts,and capital spend.
“The objective is to achieve zero complaints,” explained Simon Yeates,Director of Facilities for Cofathec Heatsave.“That may appear to be an immense undertaking,but by transferring the risk the contractor has a single objective and that is to deliver the agreed environmental conditions.How that is achieved is the contractor’s responsibility.The client is freed of time consuming tasks,such as negotiating the best energy tariffs,and even the worry of finding capital for equipment replacement as plant modernisation now forms part of the service.”
Simon Yeates cites a 2,000 m2 property in the Midlands where Paying for Performance has over a 15 year period meant greater investment in PPM,but in return has produced year on year savings.“During the period we have been maintaining the building the PPM costs have risen by five percent.Against that the building owner has seen a 15 percent reduction in capital expenditure,eight percent energy savings,and a three percent improvement in plant performance.Based on a 10 year profile,the Paying for Performance scheme has produced between five to eight percent savings on operational costs,money that can be used to improve the building to attract higher rents or added to company profits.”
Audit regime
“Too often the focus is on maintenance tasks rather than operational standards and requirements,” said Mike Goodwin.“The whole ethos of PPM for example is about moving parts,which can lead to static plant,such as pipes and ductwork,being overlooked.
Also,many vital questions are not necessarily being addressed.On a day-to-day basis a piece of equipment may appear to be working well, but an analysis of its history might show remedial work having been carried out on several occasions in the last few years.This begs the question why?Is there an on-going problem that will intensify with time and if so what is the long-term prognosis;
replace now or continue to monitor and manage? Remember,in the right location an unforeseen chiller service that may cost only £2,000 to undertake could lead to £1 million in lost revenue if the unplanned work temporarily puts the trading room of a financial institution out of action,for example.”
While for the landlord,unaudited maintenance routines can store up expensive futurecosts.Mike Goodwin referred to a case against a landlord where the air conditioning system did not operate in the manner in which it was designed and,therefore,contravened the terms of the lease.The dispute went to court and even though the landlord could show that he had spent money in an attempt to remedy the situation,the court ruled that the “lease obligation was an absolute obligation”.It was finally determined that there was a “…difference between rental of air conditioned office space as opposed to heated office…” and the landlord was instructed to repay significant sums to his tenants.
Culture change
Cofathec Heatsave is changing its approach to managing the buildings under their care.“We are incorporating more management time within the engineering duties as it is our belief that if we achieve the right level of quality service then the profit will follow,” said Richard Derry. “The challenge lies in getting the market to appreciate the importance of the management element as there is still a strong ‘bottom line’ culture.”
